Ongoing drought could see farmers in Australia’s principal dairy state of Victoria walk off the land, Simone Smith writes.

It’s the last day of summer and the weather forecast for Shepparton – a key town in the northern Victorian dairy region – is 37C.

The forecast for the coming week is an average of 35. There’s no rain in sight. But there hasn’t been any rain of-note for a long time.

The most recent price for irrigation water traded on the spot market in northern Victoria was $455 a megalitre- this price isn’t viable for dairy farmers. Just weeks earlier, it hit $520/megalitre the highest it’s been since 2009, according to Dairy Australia.

Milk production in northern Victoria declined 22.6% in December compared to the same month the previous year, according to Dairy Australia. For the year, to the end of December, the region’s production was down 14.7%.

Mother nature can be so cruel.

‘We plant a lot of annuals, perennials don’t last, and we want bulk feed early and (with annuals) we know we get a strike.’

Down the phoneline from his dairy farm in Gippsland, United Dairyfarmers’ of Victoria president Paul Mumford sighs.

“I’m concerned we are going to start seeing people just walk off the land,” he says.

“The other problem, it’s the implosion of the district and its communities.”

Mumford took over the role late last year to head the dairy lobby group in Australia’s largest milk producing state months ago.

The next 12 weeks will be telling for the northern Victorian dairy industry – a region reliant on irrigation water which is hotly debated across the country.

“There are substantial number of dairy farmers leaving the industry already, they’ve closed their doors and sold cows, some have gone straight over the hooks,” he says. “They’ve had enough of the trying, testing times of the dairy industry.”

“(The 12-week timeframe) is to do with rain, if they don’t receive rain by a certain date in the region, crops will fail.”

Mumford says it is “quite probable” for northern Victoria to lose a third of its milk production this financial year.

Total Victorian year-to-date production was 6.1% down at the end of December reflecting dry conditions and drought which has led to the rise in costs such as hay and grain.

Total Australian production was 4.8% behind December 2017 and Dairy Australia has forecast total national production to be down 7-9% to 8.45-8.65 billion litres this season (ending June 30).

Costs have skyrocketed. According to Dairy Australia’s Situation and Outlook report released in February, January hay prices in northern Victoria were 227% more than the same time last year. Prices were 149% higher in Gippsland and 95% more in western Victoria. Grain prices in northern Victoria were 61% more, western Victoria was 58% more and Gippsland 56% more.

Last year irrigation water averaged $233/megalitre, 188% up on the previous year.

Pasture is spared for the few regions with irrigation, everyone else relies on homegrown stored fodder, culling cows or trying their luck to secure whatever they can in the fodder market.

Mumford says the decline in production in the northern region of Victoria would place more pressure on the regions of Gippsland and Western Victoria. Historically, these three regions equally shared Victoria’s milk output.

James Breen farms with his family at Beeac north of Colac in south west Victoria.

Beeac is “fringe dairy farming” country, on the border of where the landscape turns from livestock into lower rainfall cropping country.

It’s late February and apart from the green-pick poking through the ground across their 60 acres of Lucerne, there’s not pasture available.

This green pick shot after 29mm of rain in early February.

The 240- milking herd is fed from homegrown fodder, a combination of 800 pasture silage round bales and the same of pasture and cereal hay cut across 627ha, including leased land.

The Breen farm is totally self-sufficient for fodder, so unlike many other dairy farms in Australia, they haven’t had to venture into the fodder market.

The average rainfall is about 457mm, but Breen shrugs: “what’s average”?

“We rely on the traditional March/April early break.

“We plant a lot of annuals, perennials don’t last, and we want bulk feed early and (with annuals) we know we get a strike.

“We calve in March, to match pasture, we tried calving in spring and the output wasn’t adding-up.”

Every move the Breen family business makes is centred on the seasonal conditions, from the type of cows they milk – mostly Illawarras with some Holsteins and crossbreds – to the number of cows they milk and what’s fed.

Dairy, worth $4.3 billion in 2017-18, hasn’t been far from the national headlines in recent months. This has been hard to fathom for an industry which pales in economic significance compared other sectors of the economy such as mining and tourism and ranks third behind its agricultural cousins wheat and beef.

Most recently a large supermarket chain, Woolworths, lifted the price of its controversial $1-a-litre private label milk to $1.10/litre. Private label fresh white milk sold through supermarkets makes-up about 8% of Australia’s total milk pool. This battle of cheap private label milk has been going on for more than a decade. Other large supermarkets haven’t followed-suit.

Then came a proposal by the Federal opposition for a “floor” farmgate milk price.

Mumford says there are a “myriad” of contributing factors as to why the dairy industry is at forefront of Australian public discussion.

“Over quite some time, five to 10 years or even a little longer, the Australian dairy industry has been struggling with the cost of production and different styles of farming systems.

“Different costs of production have been introduced with different pricing systems and the complexity around a commodity like making milk has made white noise.”

The “white noise”, according to Mumford, is the complexity and uncertainty associated with dairying in Australia. This encompasses everything from increasing production costs, to water policy through the Murray Darling Basin to shrinking margins in farm businesses and private label milk sold at supermarkets.

None of these factors appear to be disappearing anytime soon.

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